Published 4:00 am, Thursday, March 11, 2004

Photo: CHARLES DHARAPAK

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President Bush, center, carries three-month-old Brooke as her mother Nicole Lee, third right, from Akron, Ohio, looks on after Bush spoke at the Women's Entrepreneurship in the 21st Century Forum in Cleveland, Ohio Wednesday, March 10, 2004. (AP Photo/Charles Dharapak) less

President Bush, center, carries three-month-old Brooke as her mother Nicole Lee, third right, from Akron, Ohio, looks on after Bush spoke at the Women's Entrepreneurship in the 21st Century Forum in Cleveland, ... more

2004-03-11 04:00:00 PDT Washington -- President Bush, concerned that Democrats have hurt him politically in the debate over trade and off-shoring jobs, fired back Wednesday in Ohio, saying he has faith that American workers can compete against anyone and deriding his opponents' policies as "tired" and "defeatist."

"Some politicians in Washington see this new challenge, and yet they want to respond in old ways," Bush told a group of female business owners in Cleveland. "Their agenda is to increase federal taxes, to build a wall around this country and to isolate America from the rest of the world."

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Bush's speech -- and White House briefings -- made clear that he intends to make an aggressive defense of his economic policies and cast himself as a voice of optimism with what spokesman Scott McClellan called "a positive agenda."

Democratic candidates and lawmakers, led by soon-to-be presidential nominee John Kerry, have blasted Bush for months over the economy's stagnant job growth. They have linked the issue to off-shoring, the term for corporate America's increasing push to send jobs overseas to slash their labor costs.

"George Bush is the last person in America who actually believes his failed economic policies will ever work," Kerry said Wednesday during a campaign stop in Chicago.

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Bush blamed lackluster job growth not on businesses sending jobs overseas but on rapid productivity growth that is at a 50-year high, driven by new technologies that are displacing workers. He repeatedly said the economy is in a productivity-led transition in which fewer workers are needed to produce the same amount of goods and services. The answer to job losses, he said, is better training and education for workers.

He called higher productivity "a good thing" that will lead to higher wages, while acknowledging, "If you're the one going through the transition, it's not an easy experience."

But he sharply attacked Democratic remedies as a step backward. "That old policy of tax and spend is the enemy of job creation," Bush said. "The old policy of economic isolationism is a recipe for economic disaster. Americans have moved beyond that tired, defeatist mind-set, and we're not going back. There's a better way."

It was Bush's first full-throated defense of his trade and economic policies that for months have been under ferocious attack by Democrats who view the economy's lackluster job creation -- and rising fear among workers that they are losing their jobs to cheaper labor in India and China -- as their best chance to take back the White House.

Bush highlighted instead the jobs created by free trade, and he chose to make his stand in Ohio, a Midwestern state hard-hit by the loss of manufacturing jobs that also is expected to be a pivotal swing state in the November election. Bush won Ohio by about 150,000 votes in 2000, and Wednesday's visit was his 15th to the state.

Kerry, as he advanced during the Democratic primaries, increasingly took up the trade and jobs issue. Polls show the economy is the president's most vulnerable issue, with only about 40 percent support for his politics.

The Massachusetts senator voted for the North American Free Trade Agreement and other trade pacts, but he has said he would conduct a review of all of them as one of his first actions in office. He also has proposed legislation that would require foreign call-center operators to identify their location.

Speaking Wednesday to union leaders, Kerry advocated repeal of Bush's tax cuts for the highest-income brackets, while promising to keep the tax cuts aimed at the middle class, including the child tax credit, repeal of the marriage penalty and the new bottom tax bracket for low-income workers. And he promised to add more tax cuts aimed at the middle class to assist in paying for college tuition and health care.

Bush's counterpunch, in the form of Wednesday's speech, arrived after a number of political missteps that included comments in early February from his chief economic adviser, Gregory Mankiw, that job outsourcing "is probably a plus for the economy in the long run."

While Bush on Wednesday expressed empathy for laid-off workers, he fully embraced Mankiw's analysis that low job growth is driven by technology and productivity.

But the president, surrounded by female business owners, framed the issue as a "new challenge" to American workers and businesses.

"The economic isolationists have a pessimistic outlook," Bush said. "They don't show much faith in the American worker or the American entrepreneur. They don't think we can compete."

Even as the government released new trade deficit figures showing another record monthly high of $43.1 billion, Bush defended trade as sustaining thousands of jobs in Ohio -- despite the state's loss of 200,000 since he took office.

"Millions of American jobs are supported by exports. That's a fact," Bush said, saying one in five factory jobs is supported by exports.

"The surest way to threaten those jobs is a policy of economic isolation, " Bush said. "The surest way to add more jobs is a confident policy, a confident economic policy that trades with the world."

He also defended his tax policies, saying his critics "never get around to explaining how higher taxes would help create a single job in America -- except maybe at the IRS."

UC Berkeley political scientist Nelson Polsby dismissed the Ohio speech as "painting by the numbers."

"The numbers say Ohio is going to be crucial, jobs are important in Ohio, so he goes there and says what he thinks will appeal to them," Polsby said. "The only real issue in the end is whether anybody believes he's doing what he says he's doing, or whether this is another faith-based initiative."

Ohio's unemployment rate in February was 6.2 percent, higher than the national average of 5.6 percent.

Stephen Hess, a presidential analyst at the Brookings Institution, said it was "about time" that Bush responded to Democratic attacks about off- shoring. "They've been so defensive on this, they've danced around it, and there's been so much demagoguery on the other side, I've been curious to see when the president was going to respond and how."

Hess noted, as do most analysts, that Bush's re-election may be riding on the job performance of the economy. Job creation typically lags a pickup in economic activity after a recession, but the length of that lag in this business cycle has taken most economists by surprise. Many, including Federal Reserve Chairman Alan Greenspan, agree that productivity growth is holding back job creation but predict a turnaround soon, given the strength of growth in the gross domestic product.

And much of the job loss has been in manufacturing, which happens to be concentrated in the Midwestern states pivotal to the Electoral College in a tight presidential race.

If the job losses "happened in Texas, they wouldn't hurt him much," said Hess. "If they happen in Ohio, they could hurt him a lot."